When it comes to choosing an investment option when you join a super fund, there are several key questions you should ask yourself:
· Do I understand how asset classes work?
· What is my level of comfort with risk?
· What type of returns am I looking for?
· How long is my investment timeframe?
All investments are designed to make a return and are subject to different levels of risk, depending on the asset class. This means that as well as making money, there's also a chance that you could lose it. You might also think of risk as the possibility that your investments don't achieve your financial objectives. As a general rule, the bigger the potential investment return, the higher the investment risk and the longer the suggested investment timeframe.
Consider your age when determining how long you expect your money to remain invested (that is, your investment timeframe). This will help determine the most appropriate investment mix and asset allocation for your circumstances. If you are young, you may be able to invest your money for longer and can therefore weather the short term fluctuations that can occur when investing in higher-risk options such as shares. If you are older and need to access your money sooner, it may be more appropriate to protect your money by investing in lower-risk options such as fixed interest.
With so many options available, knowing what to choose may feel overwhelming. While your fund can explain the different investment options available to you, speaking to a financial adviser can help you choose options that may suit your personal circumstances and financial objectives.
Source: CFS
